China Gold Imports : Now Greater Than ECB
Posted: September 11, 2012 Filed under: Central Banks, China, Euro Zone, Gold | Tags: China, ECB, European Central Bank, Gold, Hong Kong, International trade, Tonne, Year-to-date Leave a comment
National emblem of the People’s Republic of China (Photo credit: Wikipedia)
As reported in ZeroHedge, Chinese gold imports continue to skyrocket.
In July,Chinese gold imports from Hong Kong, after two months of declines, have picked up once more and hit a three-month high of 75.8 tonnes. While it is notable that this number is double the 38.1 tonnes imported in July 2011, and that year-to-date imports are now a record 458.6 tonnes, well over four times greater than the seven month total in 2011, which was 103.9 tonnes,.
Far more important is that in the first seven months of 2012 alone, China has imported nearly as much gold as the total holdings of the European Central Bank (ECB). Just as important, considering the import run-rate has hardly slowed down in August, which data we will have in a few weeks, it is now safe to say that in 2012 alone China has imported more gold than the ECB’s entire official 502.1 tonnes of holdings.
Commerzbank Gold and Precious Metals Forecasts
Posted: September 10, 2012 Filed under: Bernanke, Central Banks, Euro, Euro Zone, Forecasts, Gold, Inflation, Platinum, Precious Metals, Silver, The Federal Reserve | Tags: Bloomberg, China, Exchange-traded fund, Gold as an investment, India, Precious metal, United States, World Gold Council 1 Comment
Polski: Sztabka złota ważąca 12,5 kg. Własność Narodowego Banku Polskiego. (Photo credit: Wikipedia)
Commerzbank Forecasts 2012/13
Q3 Q4 Q1
Gold 1700 1900 1950
Silver 31 35 38
Platinum 1500 1750 1800
Palladium 650 750 800
US$ per troy ounce
Gold to shine again in the second half of the year
A firm US dollar, selling by speculative financial investors and subdued physical demand have put pressure on the price of gold in recent weeks. We expect demand to pick up again in the second half of the year and envisage the gold price again reaching last year’s record high towards the end of this year. Silver, platinum and palladium are likely to find it hard to make significant price gains given the gloomier economic prospects.
In May, gold moved lower amid the general downtrend, losing 6.3% over the course of the month in US dollar terms. This marked the fourth largest monthly loss in the past 3½ years. What was remarkable was that the decline occurred despite the escalation of the sovereign debt crisis in the Eurozone and the deterioration in the global economic outlook.
Furthermore, over the past month, gold lost just as much as the S&P 500 stock index on a percentage basis. Does this mean that gold’s role as a safe haven in times of crisis has weakened? As we highlighted in a research note in August of last year, gold generally fares better than other asset classes in times of crisis. Government bonds are one exception, which performed similarly as well or better than gold in past crises.
We updated the data series used at that time for the months up to and including May 2012. The results remain unchanged. Hence, the past month is likely to represent an anomaly. We have observed similar outliers in the past, for instance, in September 2011 and October 2008. The fact that gold was unable to benefit from an escalation in the crisis can be put down mainly to the stronger US dollar. The dollar appreciated by 5.5% from late April to the end of May on a trade-weighted basis to reach the highest level in just under two years (Chart 1).
The reason for this was that, due to the Eurozone debt crisis, investors sought refuge in US Treasuries, the largest and most liquid bond market in the world. Other investors took a flight to quality into liquid German Bunds. The weaker euro was subsequently reflected in its entirety in a declining gold price. The gold price also came under pressure of late from sales on the futures market. Speculative financial investors reduced their net long positions by a further 37,500 contracts in May. This represents a volume of 117 tons, or more than twice as much as was absorbed by ETFs in the first quarter of 2012. Speculative net long positions have more than halved since early May, and at a good 70,000 contracts currently, are at the lowest level since December 2008
At the same time, investment demand has also been rather subdued of late. The gold-backed ETFs tracked by Bloomberg recorded a slight outflow of 15 tons in May. Sales of US gold coins totaled 53,000 ounces in May, which represented more than a doubling in sales compared to the extremely weak previous month. In the same month of the previous year, this figure had stood at more than 100,000 ounces, however. According to the World Gold Council, demand for gold bullion and coins in the first quarter totaled 338 tons, 17% lower than in the previous year. At the same time, this was the lowest level since the third quarter of 2010. Given declining inflation rates due to the weak economy, austerity measures and falling oil prices, interest in gold as a form of inflation protection has obviously waned perceptibly .
India and China
Gold demand in India this spring was particularly disappointing. While jewellers have ended their weeks-long strike after the government reversed part of its planned tax increase, but in light of record-high gold prices in local currency terms, households are selling gold at a faster pace. According to the Bombay Bullion Association (BBA), the supply of gold scrap could more than double this year to around 300 tons. This is compounded by the fact that demand is being slowed by record-high domestic prices. Accordingly, less gold needs to be imported. According to the BBA, gold imports have probably halved year-on-year to 50-60 tons in May. However, this weakness is offset by China, which will likely overtake India as the world’s largest consumer of gold this year. In April, China imported more than 100 tons of gold from Hong Kong (Chart 3). Since the start of the year, Chinese gold imports from the former British Crown Colony have reached 239 tons. That is nine times the total in the same year-earlier period, and more than half of total imports last year. Even the 6% year-on-year increase in domestic output to 110 tons over the same period was not nearly enough to satisfy surging demand. A large share of the gold imports from Hong Kong likely found their way into the vaults of the Chinese central bank, which does not release any regular data.
Central Bank Buying
The central banks continue to represent a price-supportive factor. Last year, net purchases by the official sector totaled 440 tons, the highest level in 47 years. According to the IMF, central banks bought 130 tons of gold in net terms in the first four months of this year. Although this is somewhat less than the 152 tons in the same year-earlier period, buying activity in April rose measurably. The biggest buyers this year are Turkey (44 tons), the Philippines (35 tons), Mexico (19.5 tons), Kazakhstan (16 tons) and Russia (13 tons).
What is the outlook for the gold price going forward?
We remain convinced that in the second half of the year, the gold price will resume its uptrend which was interrupted in the spring. The adjustment among speculative financial investors is now likely to be more or less finished, so that the selling pressure from this front is likely to wane. In this vein, it is fitting that the operator of COMEX, the CME Group, lowered its margin requirements for gold futures by 10% at the end of May. This lowers the costs for purchasing and holding a At the same time, investment demand has also been rather subdued of late. The gold-backed ETFs tracked by Bloomberg recorded a slight outflow of 15 tons in May.
What Are German Investors To Do ?
Posted: September 9, 2012 Filed under: AMP Books and Seminars, Euro, Euro Zone, Germany, Gold, Inflation, Politics, Precious Metals, Silver | Tags: European Central Bank, European Commission, European Stability Mechanism, Eurozone, Germany, Market trend, Precious metal, United States 3 Comments
English: European Central Bank, Skyper and Silver Tower in Frankfurt am Main, Germany (Photo credit: Wikipedia)
What Is Germany Thinking ?
The euro zone enters a dangerous week, strewn with potential landmines, in a somewhat more optimistic mood after investors welcomed a European Central Bank plan to prevent a breakup of the single currency.
German judges, Dutch voters, IMF inspectors and Brussels regulators could all spring surprises that make it harder to resolve a sovereign debt crisis which is almost three years old and weighing on the world economy.
Wednesday is the main day to watch.
Germany’s constitutional court rules then on the legality of the euro zone’s permanent financial rescue fund, the European Commission unveils detailed plans for a euro zone banking union, and the Netherlands holds a cliff hanger general election.
Then European finance ministers meet in Cyprus from Friday to try to thrash out differences over banking supervision and possible extra aid for Spain, the zone’s fourth biggest economy, and Greece, the problem country that first triggered the crisis.
Decisions on Spain and Greece are not likely until October, but the talks may point to whether Madrid will apply for European assistance, at the risk of unpalatable conditions and supervision, and whether EU and IMF inspectors are leaning towards allowing a vital aid installment to keep Athens afloat.
Europe has been holding its breath for two months for the German court ruling, a potential show-stopper.
All 20 legal experts polled by Reuters expect the judges to let the European Stability Mechanism and a European fiscal discipline pact go ahead, but most expect them to add tough conditions for future bailouts.
That could potentially tie Chancellor Angela Merkel’s hands or, at the least, make her backing for bailouts politically even more difficult given a public backlash against last week’s ECB decision to buy the bonds of vulnerable state
The Precious Metals Bull Market
is Just Beginning to Heat Up
Today, we sit at a historic crossroads.
It’s a once-in-a-lifetime moment when you can make a huge fortune on gold, silver, and other junior mining stocks.
Even though the major resources — gold, silver, platinum, copper, zinc, etc. — have had some astounding runs, we are not anywhere close to the end of this precious metals bull market.
You see, the United States is in terrible economic shape, plagued by an out-of-control national debt. And it’s doubtful we’ll get out of it anytime soon.
As a result, prices of gold, silver, platinum, and other resources have started climbing…
In fact, I’d say that in five years, all of these things — gold, silver, and platinum — will be much higher in value than they are today.
Some currency analysts are calling for gold to hit $5,000 an ounce… and silver $200 an ounce.
And the soaring prices and new technologies are putting previously inaccessible deposits of precious metals and other resources within reach — much faster than ever before.
As a result, these stocks have the potential to shoot up quicker — and higher — than at any time in the past.
It’s a commodities bull market you don’t want to miss out on.
Regardless of what happens to the economy.
Why Junior Silver Stocks Could Deliver You
Even Bigger Gains than Junior Gold Stocks
Recently, silver has been in a more extreme bull market than gold.
That means the gains we could see here could be astronomical.
You see, the price of silver per ounce has usually been equal to around 1/16th of an ounce of gold — meaning it took 16 ounces of silver to equal a single ounce of gold.
But over the past decade, gold has taken off, leaving silver behind… that is, until last year.
Silver hit a record average annual high price in 2011 of $35.
Gold and Silver Requires Knowledge To Profit
Your Investment Library Will Decide Your Investment Success
The Apprentice Millionaire Portfolio
Order now from amazon.com
500 pages of proven strategy and portfolio selections in gold, silver, oil and resources to provide insurance from the euro crisis
500 pages of proven strategy and portfolio selections in gold, silver, oil and resources to provide insurance from the euro crisis
|
|
|
|
|
|
Inflation, The U.S. Dollar and The Euro
Posted: September 4, 2012 Filed under: Bernanke, Central Banks, Euro, Euro Zone, Forecasts, Gold, Greece, Inflation, Precious Metals, Quantitative Easing | Tags: August, ECB, Eric Rosengren, European Central Bank, European Union, Federal Reserve System, Mario Draghi, Phillips Curve Leave a comment
Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)
And now the nucleus of Europe, and Germany, is starting to split. German unemployment increased five straight months in August to reach 2.9 million. Factory orders fell 7.8% in June YOY as manufacturing output contracted further in August.
And listen up all you lovers of the Phillips Curve and inflation atheists; Spain’s unemployment rate has just reached another Euro-era high of 25.1% in July. However, inflation is headed straight up, rising from 1.8% in June, to 2.7% in August. But this is just the beginning of rising unemployment and soaring inflation. Just wait until the ECB and Fed launch their attack in September.
The European Central Bank and Federal Reserve are both about to announce, this very month, an incredible assault on the Euro and the dollar. The European Union said on August 31st that it proposes to grant the ECB sole authority to grant all banking licenses.
This means the ECB would be allowed to make the European Stabilization Mechanism—if sanctioned by the German courts on September 12th–a bank, which would allow them an unfettered and unlimited ability to purchase PIIGS’ debt. This is exactly what Mario Draghi meant when he said he would do “whatever it takes to save the euro.”
Not to be outdone, Fed Chairman Bernanke gave a speech on the same day indicating that open-ended quantitative easing will most likely be announced on September 13th. Fed Presidents Eric Rosengren and John Williams spelled out what open-ended QE means. The Fed would print about $50 billion per month of newly created money until the unemployment rate and nominal GDP reach target levels set by the central bank.
Incredibly, Mr. Bernanke said in his speech at Jackson Hole, WY that previous QEs have provided “meaningful support” for the economic recovery. He then quickly contradicted himself by saying that the recovery was “tepid” and that the economy was “far from satisfactory.” He also said, “The costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”
Therefore, the Fed believes their attack on the dollar has helped the economic recovery and that it has been conducted with little to no negative consequences. Of course, you first have to ignore the destruction of the middle class. And incredibly, Bernanke also believes the $2 trillion worth of counterfeiting hasn’t quite been enough to bring about economic prosperity, so he’s going have to do a lot more.
What the Fed and ECB don’t realize is that their infatuation with inflation, artificial low rates and debt monetization has allowed the U.S. and Europe the ability to borrow way too much money. Their debt to GDP ratios have increased to the point that these nations now stand on the brink of insolvency.
And now these central banks will embark on an unprecedented money printing spree that will eventually cause investors to eschew their currencies and bonds. Therefore, they have managed to turn what would have been a severe recession in 2008, into the current depression in Southern Europe and a U.S. currency and bond market crisis circa 2015.
The only good news here is that the failed global experiment in fiat currencies may be quickly coming to an end. In the interim, investors that have exposure to energy and precious metal commodities will find sanctuary.”
James Turk Forecasts Gold Breakout
Posted: September 4, 2012 Filed under: Central Banks, Euro Zone, Forecasts, Gold, Precious Metals, Silver | Tags: Eric, Fiat money, King World News, KWN, Labor Day, Market trend, Silver, Turk 1 Comment
English: Crystaline Gold (Photo credit: Wikipedia)
September 4 King World News Interview
“This breakout (in gold and silver) is very important historically because it is not only ushering in the next great move in the metals, but it also signals the beginning of the next leg of the destruction of fiat money.” Turk also said, “Given that silver is still in stage 1, the media attention won’t begin until silver hits a new record high over $50 per ounce, and I think this is coming in just a few months.”
Here is what Turk had to say: “Even though the US is closed for the Labor Day holiday market, Eric, gold and silver are on fire over here in Europe. Silver has hurdled $32 while gold looks ready to take on resistance at $1700, which is a key level the bears have been defending since last March.”
“This breakout in gold and silver over the last two weeks is exactly what we have been expecting and waiting for. It is very bullish that we are seeing good follow-up buying from last week’s strength. Some of that mountain of money sitting on the sidelines is coming into the market, but so far it is only a trickle.
That will probably soon change to a torrent as people come back from their summer holidays and realize that the interrelated sovereign debt and bank insolvency crises have not gone away….
“So things are falling into place for new record highs in both gold and silver within the next few months. I expect that gold will make a new record high before the end of the year, and silver’s new high will follow soon thereafter.
I updated the long-term weekly silver chart that I have been sharing with KWN readers to illustrate silver’s major uptrend (see chart below).
We can see that the huge flag pattern has been broken to the upside, which of course is bullish. This breakout is very important historically because it is not only ushering in the next great move in the metals, but it also signals the beginning of the next leg of the destruction of fiat money.
But this pattern was only of secondary importance to the resistance level I began discussing last October. That level was $36, but given the slight penetration and subsequent reversal back below that level in February, I would now say that the key resistance level for silver is the $36-to-$37 area.
But you will recall my original comment, Eric, which still applies. When that resistance level in silver is finally hurdled, I expect to see $68-$70 in 2-to-3 months.
However, the more important point is a move like that will mean silver is finally entering stage 2 of its bull market. That is when it will really get exciting, Eric. The first stage of a bull market, which is the one we are now in for silver, is always the boring part.
Gold went into stage 2 when it cleared $1,000 a few years ago. Look at the price appreciation it has achieved since that event. Another characteristic prevailing in stage 2 is increased media attention, and that surely applies to gold. It also explains why so few people are paying attention to silver.
Given that silver is still in stage 1, the media attention won’t begin until silver hits a new record high over $50 per ounce, and I think this is coming in just a few months.”
When asked about the mining shares, Turk responded: “In the KWN interview we did a couple of weeks ago, I said that the XAU needs to clear 170 while the HUI has to move above 465. Those levels are now just a chip-shot away. When these resistance levels are finally hurdled, it will be further confirmation that everything is in gear for a major move in gold, silver and the mining shares.
We have been going through a long correction, Eric. But there is now enough evidence emerging to suggest that this correction has ended. So we should be getting ready for some spectacular rocket shots in gold, and particularly silver, over the next several months, taking both precious metals to new record highs.”
Don Coxe Interview August 31
Posted: September 1, 2012 Filed under: Central Banks, China, Euro, Euro Zone, Forecasts, Gold, Precious Metals | Tags: China, Developed country, India, SPDR Gold Shares, SPDR Gold Trust, TGR, Western world, World Gold Council 1 Comment
Mergers and Acquisitions (The Sopranos) (Photo credit: Wikipedia)
from the Gold Report
Don Coxe: There are many serious reasons why I like gold, but one very important reason has to do with the shift in the share of world gross domestic product away from the highly industrialized nations toward emerging economies in Asia. For thousands of years, people in China and in India have respected gold. The Western countries, on the other hand, were captivated some decades ago by economists who claimed that gold had become irrelevant as money. But the Chinese and Indian people hoard gold as a store of value and trade it as a treasured commodity.
TGR: Are the pricing mechanisms for gold shifting toward control by the East?
DC: Consider an art auction. If a bidder who 10 years ago only bought one painting suddenly buys 50 paintings, that bidder will greatly influence subsequent bids for the art. In China and India there are suddenly many more wealthy people than they’ve had for millennia. In a culture that values gold, newly rich middle class people will buy the yellow metal not only for personal adornment, but also as a form of savings that is safer than paper money…
TGR: Let’s talk about the Eurozone problems. How does the euro crisis affect the commodity space in general?
DC: Probably the only commodity that can benefit from the euro meltdown is gold, because the euro is the first currency ever to be backed by no government, no tax system, no army and no navy. It is backed only by a theory and a set of rules, and the people behind it have violated the theory and the rules. I doubt there is any intrinsic value behind the euro. But take the exact opposite extreme from the euro and go to something that’s been a store of value for as long as there has been civilization, gold.
TGR: Do you think we’re in a triple-dip recession in North America?
“The best single investment anyone could have made, since the year 2000—apart from buying Apple stock—was in gold.”
DC: I don’t think so. We have zero interest rates. Every recession we’ve had has always been preceded by a situation of tightening monetary policy because there was just too much spending going on, the yield curve inverted and credit problems developed. In this case, we’ve been getting along with zero interest rates now for more than four years. What we have is lassitude, but I don’t think there is going to be a recession.
That said, it’s going to look like a recession a lot of the time because—particularly as a result of the presidential election campaigns—the Democrats who are against developing power plants, against the oil industry and against the mining industry are going to feel that they have more room to carry out their crusades. That could prove to be a negative for the economy. But in general, we’re going to bump along. We’re going to be better off than the Eurozone is for sure.
TGR: Do you have thoughts about why so much corporate cash is sitting idle and what might change that?
DC: One of the biggest arguments used against gold is that gold does not pay any interest. The monetarists said you might as well keep your money in a bank account. OK, so now that we are getting zero interest on short-term deposits, the single biggest argument against owning gold is gone. As an asset class, gold has gone up every year of this millennium, and it seems to me that investing in gold makes much more sense than holding on to a lot of idle cash.
TGR: Do you think that bullion or gold stocks are the best bet?
DC: Gold stocks are the best investments, but if you want to put your savings into bullion, the easiest way to do it is to buy the SPDR Gold Trust (GLD) listing on the stock exchange, which is backed by the World Gold Council. It’s very convenient, and you can sell the bullion at any time, because it trades during the day. Bullion is a good substitute for having extra cash in hand, but as an investment, I believe you’re better off owning stocks of the well-managed gold companies that do not have political risk. It takes a lot of research to pick out the best ones, but that’s one of the things we do.
TGR: Are there any junior firms involved in these spaces that you would recommend to our investors?
DC: I’m not allowed by the Securities and Exchange Commission rules to be specific about individual stock, but I am bullish on the gold space in general.
TGR: In terms of investing in junior mining companies, whether it’s energy or gold, do you think that we’re looking at a period of mergers and acquisitions coming up or are explorers going to be able to make it on their own for a while?
DC: Both will happen. There will undoubtedly be lots of mergers and acquisitions. We look at which of the juniors are most likely to be acquired. So far, we’ve had some pretty good success with doing just that. There will be more of them. But right now, it’s pretty desperate for a lot of the juniors. There is no capital available. They can’t float stock. Their shares are selling at discounts to net asset value on the exchanges. However, if we get to $2,000/oz gold again, which probably won’t be too far off in the future, you’ll be amazed at how much these little gold and mining stocks will suddenly go up. They come back fast.
TGR: China has its own precious and base metal resources and it has growing demand. Do you think in a global sense China is going to start looking more internally to satisfy its metal resource needs, or will it keep looking outward?
DC: After thousands of years living on their land mass, the Chinese understand the limits of their own natural resources. China will reach out to find commodity resources wherever it can in the world. The Nexen acquisition in Canada is a recent example.
Things Are Going To Collapse Again In Europe ( Bank of America and AMP)
Posted: August 14, 2012 Filed under: Central Banks, Euro, Euro Zone, Greece, Quantitative Easing, The Federal Reserve | Tags: Bank of America, Draghi, ECB, Euro, European Central Bank, Italy, Mario Draghi, Spain Leave a comment
Euro ECB (Photo credit: Wikipedia)
For the first time, the ECB ( ECB President Mario Draghi at his August 2 press conference ) hinted it would use its unlimited balance sheet to intervene in a meaningful way to stem the crisis.
Bank of America FX strategist Athanasios Vamvakidis is out with a new note titled Wishful Thinking Supports EUR.
He argues that investors are over-optimistic about what the ECB will do to protect the euro, and that they’re projecting their wishes and wants onto Mario Draghi, while not listening to what he actually said, which in Vamvakidis’ view is not very much.
In Vamvakidis’ view, here’s what Draghi said at his August 2 press conference:
- ECB interventions will be conditional on countries making requests for EFSF/ESM help. Furthermore, the ECB intervention is not unlimited.
- The ECB still does not know how it’s going to deal with the matter of ECB bond holdings being senior to private creditors.
- The ECB will not give a banking license to the ESM.
Then according to Vamvakidis, this is what the markets heard:
- The ECB will give up its seniority.
- Countries will come in with unlimited firepower.
- This big aid offer will encourage Spain and Italy to ask for aid.
CONCLUSION : There’s a big gap in what Draghi said and what the reality is.
Furthermore, he writes:
— The ECB’s commitment to save the euro does not set the bar very high. First, it has always been implicit. Second, between addressing the crisis and a breakup of the eurozone there is a large range of outcomes, for which there is no commitment on what the ECB will do.
— The ECB has committed not to “blink” first by intervening when sovereign yields rise to levels that threaten macroeconomic stability. If this framework was in place earlier, the ECB would have not intervened in the periphery. Although such interventions turned out to have a temporary impact, this impact was positive, buying time and supporting the euro. Moreover, expecting such interventions was providing an implicit backstop – markets were considering 10-year sovereign yields of around 7.5% as a level close to which the ECB would intervene.
The eurozone economy narrowly skirted recession in the first half of the year, but austerity programs across the region and a debt crisis weighing ever more heavily on its periphery suggest the reprieve will be short-lived.
Gross domestic product (GDP) shrank by 0.2% in the second quarter from the first after risk-averse businesses and consumers reined in spending, European statistics agency Eurostat said on Tuesday.
It also revised up the January-March growth figure to zero from a 0.1% contraction, meaning the region averted the two consecutive quarters of contraction that define a recession.
Reuters
Europe’s debt crisis intensified during the second quarter, with Greece coming closer to an exit from the single currency and Spain struggling with a banking crisis that pushed its borrowing costs to danger levels.
BRUSSELS — The eurozone economy narrowly skirted recession in the first half of the year, but austerity programs across the region and a debt crisis weighing ever more heavily on its periphery suggest the reprieve will be short-lived.
Gross domestic product (GDP) shrank by 0.2% in the second quarter from the first after risk-averse businesses and consumers reined in spending, European statistics agency Eurostat said on Tuesday.
It also revised up the January-March growth figure to zero from a 0.1% contraction, meaning the region averted the two consecutive quarters of contraction that define a recession.
Europe’s debt crisis intensified during the second quarter, with Greece coming closer to an exit from the single currency and Spain struggling with a banking crisis that pushed its borrowing costs to danger levels.
Analysts agree the gloomy picture is not about to change.
“What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising,” said Aline Schuiling, an economist at ABN AMRO. “There is still a lot of uncertainty related to the crisis.”
In the first quarter, gross domestic product growth stood at zero in both the EU and the group of 17 EU members that use the euro currency.
Compared with the same quarter of 2011, seasonally adjusted GDP fell by 0.4 per cent in the euro zone and by 0.2 per cent in the EU in the second quarter.
The figures reflect the crippling debt crisis that has engulfed the euro zone, forcing EU-IMF bailouts for Greece, Ireland and Portugal and aid for the Spanish banking sector, while battering market confidence.
The contraction, a result of governments slashing spending and raising taxes to tackle the debt crisis, sets the euro zone up for a possible fall into recession, commonly defined as two consecutive quarters of contraction.
The latest estimates also show how badly Europe now lags behind its main economic and trade partners, with Eurostat saying GDP rose by 2.2 per cent quarter-on-quarter in the United States and 3.6 per cent in Japan.
However the bloc’s largest economy, Germany, continued to defy the worst of the crisis, aided by exports and solid domestic demand.
Germany’s economy grew 0.3 per cent in the period from April to June, national statistics office Destatis said, fractionally faster than the 0.2 per cent forecast by analysts.
Nevertheless, growth was still slower than the 0.5 per cent seen in the first quarter, as Germany, too, begins to feel the effects of the long-running debt crisis that has pushed many European countries into recession.
“Positive impulses came from both consumer spending and from net foreign trade,” Destatis said in a statement.
“According to preliminary data, exports grew somewhat faster than imports. Furthermore, both private and public spending was higher than in the preceding quarter, helping to offset a decline in investment,” the statisticians said.
Analysts expressed confidence that Germany will not fall back into a recession.
“The German economy remains relatively resilient and the expected effects of the euro zone debt crisis remained limited,” said Newedge Strategy analyst Annalisa Piazza.
Meanwhile, France also defied expectations to post zero growth.
French Finance Minister Pierre Moscovici called the result “very weak” but held to the government’s forecast for 0.3 per cent growth in 2012.
“Despite the apparent resilience of French GDP, some worrying trends persist,” warned Berenberg Bank Senior Economist Christian Schulz.
He noted France is continuing to lose competitiveness to southern euro zone countries going through difficult adjustments, with imports outpacing exports and taking the trade deficit to record highs.
The trade deficit took 0.5 percentage points off France’s growth rate in the second quarter, after detracting 0.1 points in the first quarter.
Moreover France has yet to begin serious austerity, with government spending continuing to support the economy, he noted.
Stagnant growth will make it harder for France’s new Socialist government to deliver on its pledges to the EU to cut its budget deficit from around 4.5 per cent of GDP this year to the EU limit of 3.0 per cent by the end of 2013.
Elsewhere in the euro zone, Italy’s GDP shrank 0.7 per cent, Spain 0.4 per cent, Cyprus 0.8 per cent, Finland 1.0 per cent and Portugal 1.2 per cent.
Netherlands and Austria each booked 0.2 per cent growth, while Estonia grew by 0.4 per cent and Slovakia by 0.7 per cent.
Gold In ‘Wait-And-See Mode’ Awaiting Central-Bank Action :BNP Paribas
Posted: August 12, 2012 Filed under: Central Banks, Euro Zone, Gold, Inflation, Platinum, Precious Metals, Quantitative Easing, The Federal Reserve | Tags: BNP Paribas, Central bank, Federal Reserve System, Jackson Hole, Kingsview Financial, Precious metal, Quantitative Easing, United States Treasury security Leave a comment
2010 BNP Paribas Masters (Photo credit: Wikipedia)
BNP Paribas says gold is “in the starting blocks” but could remain range-bound for a while yet.
The metal has been in a band of roughly $1,530 to $1,625 an ounce since early June. Sentiment has picked up lately, as reflected by rising open interest on higher strike options and an option skew veering more in favor of calls relative to puts. Still, other indicators, such as speculative interest, have not picked up materially. “From a technical perspective, the positive shift in sentiment towards gold will need to be confirmed by the price moving past the current strong resistance at US$1,625,” says precious-metals strategist Anne-Laure Tremblay.
“On a more fundamental basis, the market will be in a wait-and-see mode for future central-bank action before attempting to move higher. Until then, we are likely to further experience range-bound trading in gold.” BNP does see potential for the Federal Reserve to signal a third round of quantitative easing later this month at the annual Jackson Hole, Wyo., symposium. “Gold stands to benefit from monetary easing. Higher liquidity, inflation expectations and a depreciating USD are all positive factors for the balance of the year,” Tremblay says. “Only an unexpected improvement in the economic conditions in the U.S. and the eurozone would put off central-bank intervention and undermine higher prices.”
The bank says the main downside risk still lies with eurozone, where contagion from the soverign-debt crisis “could drive investors towards the U.S. dollar and Treasuries rather than gold.
Friday August 10, 2012 11:42 AM
Gold’s rally looks positive for bulls, based on technical charts, says Charlie Nedoss, senior market strategist with Kingsview Financial. “We tested the lows and made a double bottom at $1,605-06. We have an outside day,” he says. “If we can close over $1,618 basis the December (contract) it would be very positive.”
Close Over $1,618 ‘Very Positive’ For Gold – Kingsview Financial
Friday August 10, 2012 11:42 AM
Gold’s rally looks positive for bulls, based on technical charts, says Charlie Nedoss, senior market strategist with Kingsview Financial. “We tested the lows and made a double bottom at $1,605-06. We have an outside day,” he says. “If we can close over $1,618 basis the December (contract) it would be very positive.”
Platinum On Defensive, Trading At Sharp Discount To Gold : RBC
Friday August 10, 2012 9:30 AM
Platinum remains on the defensive and is now trading at a discount of more than $200 an ounce to gold. “Some traders see weakness in platinum emanating from (the) eurozone outlook as the euro also is weaker again,” says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. “The gold-plat spread (is) over $200 now…This could continue until September, when new-car sales and better economics could change the outlook.” Europe is important for platinum demand, in particular. Diesel-powered vehicles, which require platinum for catalysts rather than less-expensive palladium, are popular on the continent. As of 9:21 a.m. EDT, spot platinum was $9.60 lower to $1,396 an ounce, while spot gold was $1.40 higher to $1,618.20 after bouncing from overnight weakness.
Don Coxe On Gold and Commodities
Posted: August 12, 2012 Filed under: Central Banks, China, ETF, Euro, Euro Zone, Gold, Precious Metals, Quantitative Easing, The Federal Reserve | Tags: AGCO, Bank of England, Bank of Japan, China, European Central Bank, Gold as an investment, Tate & Lyle, Warren Buffett Leave a comment
Tate and Lyle – golden syrup (Photo credit: Believe Creative)
I am reprinting an interview from February 2012 because it was prior to this market letter starting.
I believe Don Coxe offers important perspectives here :
You’ve been a table-pounding bull on commodities for the past decade. With this long of a run, is the theme still a good bet?
Why do I think it will continue? Well, it’s because of Newton’s law, which says when something is going in a direction it will continue going there unless something comes along to force it to change. And what’s going on in the leading Third World countries is, in a compressed time frame, the story of what happened in North America when it came to challenge and eventually surpass the wealth of Europe. We’re still in the early phase of this big change. In these countries, as people go from having an income of $400 a year to an income of $4,000, the result shows up in the price of commodities. It’s the reason corn has gone from $1.50 to $6.50 a bushel – because people can afford a higher protein diet.
Could the commodity bull market survive a hard landing in China?
It would survive, but it would be painful.
What signs would show a top in the commodity sector?
It will be over in commodities when we have price-earnings ratios on the leading commodity stocks that are higher than the broad stock market, which will mean that there has been a gigantic sea change in opinion and there are no skeptics left. Right now, they’re at a huge discount to the market and we have the bizarre situation that among the mining stocks, they are doing far worse than the metals themselves. Therefore, that means the market is giving negative value for all the risk and effort involved in extracting, refining and delivering the product. These are still deeply undervalued situations.
Could you comment on the money printing by central banks through their various quantitative easing programs and its impact on commodities?
There is no question in my mind that what we’re seeing now is something that an earlier generation of gold enthusiasts would have said: “If that happens, the price of gold will be infinite.” In the last four months the club of the unlimited printers of money has trebled, so we’ve gone from the Fed being the only one, with some help from the Bank of England, to the European Central Bank and the Bank of Japan. What we’re having is an unbelievable amount of paper money being created.
You’re bullish on gold, but recently the Oracle of Omaha, Warren Buffett, dismissed gold in favour of productive assets. Why is he wrong?
The Oracle, remember, lived a large part of his life when it was illegal for Americans to own gold, and Ben Graham, his mentor, lived nearly all of his investment life at a time when it was illegal. It was not an option, so what he did was develop the theory of free cash flows from companies, and of course there is no free cash flow out of a bar of gold. But remember that he slipped from his virtue back in the 1990s and took a big bet on silver, which isn’t even a pure monetary metal and lost money on it. So he’s been repenting that ever since, and ridiculing anybody who would buy gold.
Over the 40 years ending last August, you would have been better off owning a bar of gold than owning the S&P. That shows you that gold is gradually working its way back into legitimacy. It’s not just a thing for paranoids and so forth. What’s happening is that central banks are basically throwing caution to the wind because they are so terrified about the economy. Everyone now who has wealth to protect should have something in gold because things could go seriously wrong.
Which types of commodities do you think will perform best?
I have an inbred bias to agricultural commodities because they’re the only commodities where they get totally consumed and there is never scrap. My belief is we’re still faced with a global food crisis. Right now, things are looking better for supplies of crops, but we’re depending on the weather. I believe oil prices are too high, relative to consumption, but we have the threat of [war]in the Persian Gulf, so that’s naturally putting a bid onto oil. As for the base metals, they’re tied to economic growth but it looks as though we’ve got supply and demand well balanced.
How high can gold go?
I have recommended that gold be capped at around the $2,000 level, by governments who have it, to use to back their bonds. That would mean the gold mines would be a good investment. If we’re talking about $3,000 gold or something, I’m telling you that’s going to be a very bitter world to be in.
The Coxe Global Agribusiness Income Fund is loaded up with tractor makers or dealers, such as CNH Global, AGCO Corp., and Rocky Mountain Dealerships. What’s the big allure with farm machinery?
There are only about five farm machinery companies in the world with scale, with good technology and that have the big precious asset that isn’t on the balance sheet, dealers. I believe that they have, in effect, an oligopoly. I like the fact that these are real, global companies.
These are sophisticated pieces of equipment. When you’re talking about a harvester now, the starting price is $250,000 for one of these things. So I think, with the greatest respect, to refer to them as mere tractor makers is a bit unfair.
The largest individual stock holding in your agriculture fund is Tate & Lyle. What’s to like in a sugar company?
Tate & Lyle has been around for more than a century. They produce a whole range of things out of sugar. They make [low calorie sweetener]Splenda, a very high margin product. They pay a terrific dividend. It’s an extremely well managed company.
Is it a good time to take a plunge on commodity producing stocks?
I believe that there are bargains now in stocks in a way that there haven’t been for some time. My experience has been since this commodity boom began that they don’t stay bargains for long. Their market capitalization is still relatively small, relative to the overall market. The big surprise could be how well these stock do this year, even if the price of the metals and the price of oil doesn’t go up much from where it is.
Donald Coxe – Coxe Commodity Fund – Global Strategy Update
Posted: August 9, 2012 Filed under: China, Euro, Euro Zone, Gold, Precious Metals | Tags: Business, China, Commodity, Coxe, Don Coxe, Economy, Invest, Investment Leave a comment
Commodity Distribution October 1940 (Photo credit: iluvcocacola)
August 9
COXE COMMODITY FUND (T-COX.UN) $8.66 +0.04
Don Coxe’s look at the markets for August is out and the latest issue of Basic Points is titled, “Faster, Higher, Stronger”…as anyone in the beaten up resource sector might be hoping for.
If you have ever read Coxe’s monthly letter of heard him on TV, you know he has a grasp of market history that is probably second-to-none. Having said that, what has he done for you lately in the markets? Well, not that much.
But anyway, in the latest issue he reminds us “Since 1998, we have advised clients, “Do not invest in companies that produce what China produces, or will soon be producing. Invest in companies which produce what China needs to buy.”
He continues, “Economies with costly social benefits systems and deteriorating demography age in vitality
along with their populations. It is unreasonable to expect that over-indebted Europe or the US will again have economic
recoveries of Reaganesque or Thatcherite vigor. Investors need to invest where the demand is—and will be
for coming decades. That means economies whose consumption of commodities per unit of GDP is still far higher
than ours.”
In other words, Coxe has not given up at all in his theory that those countries in the world such as India, China
and other areas of Asia that need commodities, will continue to need commodities and while we are having no fun
in the resource sector at all these days, he is a believer that everything from gold to other metals to agricultural
products will see their day in the sun...again…one hopes.
As far as Investment Recommendations for this issue, amongst his nine points were:
The US economy is slowing toward stall speed. But it looks lustrous compared to Europe. Remain underweight
Europe and maintain exposure to high-quality US stocks, particularly commodity stocks, and technology stocks with
demonstrably unique products.
He is a big gold bug and writes, “Gold has once again become a “risk-on” asset, which means it tends to fall
when the stock market falls, and to rise when the market rises. This is paradoxical and illogical. Gold is a “Bad News Bull’s “commodity. This schizophrenic period of gold and gold stock valuation is unsustainable.
AMP Gold and Precious Metals Portfolio 